Spending review: business backs infrastructure plan

Business leaders have broadly welcomed the year-long Spending Review announced by the UK government on Wednesday, particularly a renewed emphasis - and more spending - on infrastructure projects.

At a time when the coronavirus pandemic continues to ravage the UK economy along with most others across the world, Chancellor of the Exchequer Rishi Sunak told parliament that the nation's economy was set to contract by 11.3 per cent this year and grow by 5.5 per cent next.Data released later by the Office for Budget Responsibility (OBR) showed government support for public services, households and businesses would cost £280 billion this year, pushing the national deficit to £394 billion."Our central forecast shows £20-30 billion in spending cuts or tax rises would be required to balance revenues and day-to-day spending and stop debt from rising by the end of this parliament," the OBR said.While Mr Sunak has acknowledged tax rises will be necessary, Wednesday's spending Review was primarily targeted at the continuing battle to boost economic recovery, although he did announce that spending on overseas aid would be cut from 0.7 per cent to 0.5 per cent of GDP next year. He also said there was be a wage freeze for many public sector workers next year but increased the national minimum wage for the lowest paid. On infrastructure spending, the chancellor announced long-term plans for expenditure of £100 billion, a £27 billion, a £27bn increase from last year and representing what he described as the "highest sustained levels of public investment in more than 40 years".A new UK infrastructure bank would be created to oversee spending alongside the private sector, said Mr Sunak, adding that it would be headquartered in the north of England as part of the government's efforts to "level up" UK regions with the affluent South East.As part of this drive, Mr Sunak announced a new "levelling up fund" worth £4 billion, which regions could bid for to fund local projects, such as new road schemes upgraded railway stations, traffic-reduction measures or more libraries, museums and galleries.Reacting to the review, Adam Marshall, director-general of the British Chambers of Commerce, said it came at a critical time as business communities "are fighting for survival in the midst of the coronavirus pandemic".He added: “The launch of the National Infrastructure Strategy is an important step in overcoming the longstanding infrastructure deficit. We’ve spent long enough discussing infrastructure projects - it’s now time to focus on delivery.“Measures to help people return to work at this challenging time will help limit long-term unemployment but government must waste no time in putting these plans into action."Government and business will need to work together to re-train and re-skill the UK workforce. Investment in the Kickstart Scheme, in which Chambers are playing a leading role, and the launch of the Restart scheme, will be critical in helping to achieve that.Stephen Phipson, chief executive of the manufacturers' organisation Make UK, described Mr Sunak's statement as "realistic" in that it laid bare the immense challenges the economy faced in the near term."In the face of these it is absolutely right that the priority must be to protect jobs, whilst trying to create opportunities for young people whose futures have been left badly scarred. Equally, it is vital to put in place the foundations now for how we rebuild our economy," he said.“Industry will commend the chancellor for addressing this difficult balancing act with a package of measures designed to get boots and shovels on the ground, especially the National Infrastructure Bank and Levelling up Fund to boost growth in those regions which have been hardest hit.“There remains a case, however, to also put in place consistent, longer-term sector specific support that mirrors our international competitors. Key strategic sectors, in particular aerospace and automotive, employ substantial numbers of high value, well paid jobs in areas of the country that are essential to the levelling up and re-balancing of our economy."They are advanced technology companies whose skills will be vital in developing the green and digital futures which will help solve many of the societal challenges we face."Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said: "Stark forecasts point to tough times ahead. But through his statement, the chancellor has made some bold autumn decisions to power a spring recovery.“The Spending Review lays the foundations for a brighter economic future. A new National Infrastructure Bank, a multi-year settlement on R&D, and a comprehensive plan for creating jobs and renewing skills are just some of the building blocks needed to deliver on this vision. It’s right to take this opportunity to plan for tomorrow.“But ambition must be matched by action on the ground. The government’s commitment to build, build, build must be delivered now. This means a clear strategy to upgrade the UK’s infrastructure and publishing the Energy White Paper.“And there can be no let-up in the support for firms facing new Covid restrictions. Firms need help to survive, then thrive. Business investment and confidence can be the engine of UK growth, creating jobs around the UK.“We know just how vital refreshing our ageing infrastructure is to repower the economy, connect more people and create job opportunities across the UK. Putting money into roads, broadband and clean energy will help do just that.“Most importantly of all, the government has set out its stall for the long-term by creating a National Infrastructure Bank. With the right remit, the bank has the potential, to crowd in the private finance that will be crucial to delivering these new projects.”

Read more news and views from David Sapsted.

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